Subcontracting

You're a small business owner, and after evaluating your capabilities and resources against the requirements of government contracting opportunities, find yourself falling short of some areas. You're thinking that there's a small chance of you snagging a contract, but you really want in on the action! Worry not! You can still perform a part of the job through subcontracting.

Subcontracting is when you team up with a company  who has already won the contract. This experience can be beneficial to you as this can furnish you with firsthand insights on how to properly carry out contracts when you yourself finally become the prime contractor. It's not just for less-experienced businesses though. Companies who already have better chances of winning contracts can still get into subcontracting and increase their qualifications as contractors. 

There are of course regulations that govern subcontracting endeavors. Such laws include Section 8(d) of the Small Business Act and FAR 19.7. 

Prime contractors who have contracts exceeding the simplified acquisition threshold (SAT) are required by law to provide maximum practicable subcontracting opportunities to small business. Federal contracts that exceed the SAT should include the clause "Utilization of Small Business Concerns."

These laws, among other things, require that:

• On contracts over $500,000 (or $1,000,000 for construction of a public facility), large prime contractors and other-than-small subcontractors submit subcontracting plans containing specific percentage goals for small business, HUBZone small business, small disadvantaged business, women-owned small business, VOSB and service-disabled VOSB.
• Subcontracting plans must contain a description of the methods and efforts used to assure that small business enterprises have an equitable opportunity to compete for subcontracts.
• Subcontracting plans must be submitted by contractors for review prior to the award of any contract; failure to comply in good faith with its approved plan may subject the contractor to liquidated damages or termination for default.

The requirement to submit a subcontracting plan does not apply to:

• Small businesses;
• Contracts under the prescribed dollar amounts;
• Prime contracts not offering subcontracting possibilities;
• Contracts to be performed entirely outside the United States.